Wednesday, September 16, 2009

INTEGRATED BUDGET


INTEGRATED BUDGET
The budgeting work on Railways is connected with assessing or the annual requirements under Revenue Budget, the Works Programme and the Rolling Stock Programme. The Railways also submit the forecasts of earnings. These documents form the part of the Railway Budget presented to Parliament. However, hitherto, these programmes were considered separately at Railways and Board level and no connection was attempted with each other .The Capital and Revenue budgeting were slightly disjointed. It has since been realised that an integrated approach is necessary to evaluate performance of Railways,
Capital Budgeting aims at creating of infra-structure for economic development and the primary aim of investment is to generate income. Revenue Budgeting is nothing but translation of physical objectives into financial terms.
Some times Railways are in no position to generate sufficient income to pay dividend due to various social obligations investment of which have not generated sufficient income or sluggishness on the economy.
Aim of the capital inputs are primarily to generate income so that integrated approach to budget requires that each zonal railway should spell out in one place the capital and revenue inputs needed to achieve a certain level of earnings. With this aim in view, the Railway Bloard have directed all the Railway Administrations to submit a consolidated budget (ie., integrated budget) which should give the essential features of the proposed performances of each zonal railway and balance sheet reflecting the capilal-at--charge, the budgeting earnings ,an the working expenses, the net revenue and the return on capital.

The parameters to judge the performance of Railways are operating ratio, engine utilisation, passenger vehicle utilisation, wagon turn around, fuel consumption, turn over ratio etc, and the integrated budget therefore includes brief comments on the following important aspects :-
1.2
1. FINANCIAL RESULTS indicating the gross traffic receipts, working expenses, the operating ratio and the ratio of net revenue to the capita!-at-charge.
2. Proposed Plan outlays, capital investment, the dividend liability to General Revenue, the anticipated earnings for the year vis-a-vis the working expenses-
3. MATERIAL MANAGEMENT showing the position of inventories, .stores balances, manufacturing suspense and how efficient the systems are working. The "turn over ratio" is also furnished to work out the efficiency of inventory control.
4. Progress of computerization of accounts work relating to stores, traffic accounts etc.

5. Commitments about the overall operating performances with references to
a) Wagon turn round ( gap between two subsequent loading)
b) Engine turn round ( gap between two subsequent haulage)
c) Fuel consumption ( Specific Fuel Consumption - 1000 GTKMs
6. For earnings, the average lead and average rates both for goods and passenger traffic should be given
7 Projection of traffic earnings
8.Rolling Stock Programme both on additional and replacement account
9.Work, Machinery and Plant Programme
The integrated budget brings to limelight the efficiency, of working of financial viabiliity of the Railway system.
The Integrated Budget also highlights the following activities ;-
i) Requirements of Rolling Stock (Both on additional account and replacement account).
il) Incremental cost of additional traffic
iii) New trains introduced during the year.
iv) Other activities such as energisation, improvement in loco utilisation, All India whole sale price index and any other achievements worth mentioning,

1.3 The Integrated Budget is submitted along with the Preliminary work Programme in the first week of September. After discussion of the PWP, a revised Integrated Budget should be submitted along with Final Works Programme duly taking into account the changes thati might have taken place in the meantime (Para 622 of Engineering Code)
1.4 Utility
After the introduction of Performance Budget, the Significance of Integrated Budget is lost, Various statistical information that are already available can be made use of.
CHAPTER XVIII
WORKS BUDGET
1.1 The requirements of funds of Zonal Railways to progress their ongoing and new schemes proposed are to be grouped under the prescribed Plan Heads. Investment decisions relating to the creation, acquisition and replacement of assets on the Railways are processed through the Annual Works Machinery and Rolling Stock Programmes. These programmes are examined by the Board and discussed with the General Managers and the works to be undertaken and outlays during the budget year decided upon.
The works budget process stats almost a year in advance of the financial year to which it relates. Tentative requirements of funds are required to be projected at the beginning of say May '06 for the year 2007-08. This information is required to be presented in two parts.
(A) Throw forward amounts for the year 2006-07 from
i) Works in progress included in the budget of 2005-06
ii) Anticipated cost of new works included in the budget for 2006-07 workwise and classified under Cap, DRF, DFand Capital Fund.
(B) Tentative requirements for 2007-08 for:
i) Works in progress
ii) For new works proposed in 2006-07 classified workwise and under Cap, DRF, DF and Capital Fund.
In addition, Fhe plan oullay during the subsequent years of fhe plan is also required to be furnished under each plan head workwise. Simultaneously all schemes costing over Rs 3 Crores are required to be got cleared by the Board after a broad serutiny of the financial implications as presented by the Railways. Track renewal proposals are furiher examined with reference to overall priorities having regard to the availability of Permanent Way materials.
1.2 i) In about June/July '2006 the Railway Board will convey to each railway in respect of each plan head the total outlay within which the works programme should be framed by the Railways. The railway taking note of the ceilings is required to submit the Preliminary Works Proramme some time in Aug/Sep 2006. In this outlay proposal for each work indicating the actual expenditure upto March 2006, outlay proposed for 2006-07, outlay proposed for 2006--08 together with balance to complete the works have to be shown. In addition two more annexures regarding (i) the position of actual expenditure on staff quarters and outlays proposed in the current and next year as also balance to complete the work and (ii) employment likely to be generated in the current year and next year under unskilled, educated, technical and non-technical are required to be given.
n) Project costs have to be based on firm dala and once the same is approved the changes in scope of the project should be allowed without prior reasons being adduced for accpctance by the Railway Board. As far as possible only the last sanctioned costs should be exhibited. Works sanctioned and taken up should continue to be included every year till they are finally completed.
iii) Works approved in earlier years and but commenced as well as works approved in earlier years but for which estimates have not been sanctioned by 30th June are required to be indicated in the programme.
iv) Certain far-reaching decisions have been taken in the recent years in regard to regard excess over estimates, material modification etc. It has been decided tlhat no outlay would be made available if there is no corresponding estimate provision left for utilization. This would mean that wherever there has been excess over estimates, these would have got to be covered by a proper sanction for the revised estimated cost by August itself. Only then it will be possible to reflect the revised cost in the statements and ask for the required budget provision in the succeeding year. In respect of material modifications also, Board have decided that a serious view would be taken if material modification not within the GM powers are not covered by a proper sanction. While approaching the Board with material modifications, the revised financal iimplications have to be brought out. These measures have cast a great responisibility on the project organisations to see that they confine themselves to the works provided for in the original estimate and if material modifications within their own powers are involved find out savings elsewhere to absorb them and where they are not within their own powers approach the Baard in time before the works are executed. In practice, however there are considerable problems in getting the revised estimates sanctioned mainly due to the time laken for secretarial scrutiny.
v) After having examined the individual railways progrommes the Board decide which works should be included in the next year's budgel and direct the railways to modifiy the programmes and submit the works programmes on ihe stipulated dates. The budget estimates therefore reflect the final investment decisions. The estimated amount is advised to the Planning Commission/Ministry of Finance for necessary provision being made in the ways and means budget of the Govt. of India and after it has been ascertained that funds will be available, the programmes are submitted to the Ministry for approval.
vl) Thereafter the demands for grants and other papers are presented to Parliament. With the recommendations of the President Appropration bill is also introduced for drawal of funds from consolidated fund of India. This bill passed in the Parliament and asssented to by the President forms the budgetary allocation to the railways, Thereafter, allotments are made to the railways through budget orders. Allotments fixed by the President are shown as 'charged'.
I.3 No reappropriation is permissible between 'voted' and 'charged' allotments as also between capi al, railway funds and revenue. The provision under ihe plan heads (i) electrification projects (ii) new lines, (iii) gauge conversions, (iv) track renewal cannot be reappropriated without the approval of the Board. This equally applies in (i) staff quarters and (ii) amenities for staff under staff welfare works as well as passenger amenities and other railway users' amenities. Other re-appropriations are, permissible before the close of the financial year.
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The stages for review and asking for additional provision/surrendering provision not required are at the August review, revised estimate, first modification and final modification stages. Supplementary grants should be sought in the same financial year in which it is required. In case expenditure has already been incurred, these should be covered by seeking excess grants based on the recommendations of the Public Accounts Cummittee as a result of the scrutiny of the Appropriation Accounts by the C&AG of India.
1.4 The expenditure to be forecast is also to be comipiled and reflected under diffarent primary units,
The main points to be taken care of in framing these estimates are :
a) Wherever payments are made by other railways on Railway Board contracts a forecast of the likely payments is to be obtained from them.
h) Similarly in respect of services rendered or work done also either by home railway or others the adjustments are to be estimated properly and incorporated.
c) budget section should identify the spending units and ensure That the projections arec received in time and taken note of
d) In the above cases the process involves advance action. in other respects it is just the process of review of likely payment;it has to be carefully noted in this connection that if the reviews are to be purposeful the current state of expenditure should be readily available under various primary units and further split up into the components thereof in the same manner in which the budget has been built up. This would only be possible if a computerised system of compiling the transactions under these components on a monthly basis is evolved. With the advent of personal computer this is an elementary exercise and from February onwards even a day to day watch can be attempted to produce worthwhile results. Large scale adjustiments vitiate the budgetary process and it is here that a close interaction between the executive and Accounting Wings is called for.

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